Maybank Securities analyst Thilan Wickramasinghe has upgraded his 12-month Straits Times Index (STI) target to 4,020 points, from 3,890 points previously. His new target represents an upside of 6% to the STI’s Jan 3 close of 3,801.83 points.
“Following a strong 2024 finish, we expect Singapore’s positive momentum to continue in 2025,” he writes in his Singapore strategy report dated Jan 3, noting that banks, REITs, internet counters and small- and mid-cap stocks will lead the momentum.
According to Bloomberg data, the benchmark index closed at an all-time high of 3,886.98 points or 1.54% higher than the previous day’s close. The boost was thanks to all-time highs seen in the three banks, DBS Group Holdings, Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB). Yangzijiang Shipbuilding, another component of the STI, also saw new highs.
As at Jan 8, shares in DBS, OCBC, UOB and Yangzijiang closed at $45.44, $17.55, $37.80 and $3.08 respectively.
In 2025, Wickramasinghe sees potential for further upgrades as Singapore is likely to benefit from the US-China trade war due to the city-state’s trade deficit and free-trade agreement (FTA) with the US.
See also: Overall softness in Singapore retail sector, but premium groceries hold long-term prospects: DBS
At the same time, the republic should also be able to enjoy the spill-over effects of the Chinese fiscal stimulus. About 62% of the fifty-largest market cap stocks listed in Singapore are generating revenues in China and Hong Kong, Wickramasinghe points out.
To this end, the analyst expects the pace of capital returns to increase with the STI posting a dividend per share (DPS) compound annual growth rate (CAGR) of 8% from FY2024 to FY2026, compared to the 6% in the past 10 years.
“We also expect improved efficiencies to start showing in earnings through mainstreaming artificial intelligence (AI) use cases in 2025,” he writes.
Other catalysts to the market include the Johor-Singapore special economic zone (JS-SEZ) and the equity market reforms conducted by the Monetary Authority of Singapore (MAS) if executed well, he adds.
Wickramasinghe has identified DBS, UOB, OCBC, Singapore Post (SingPost), Marco Polo Marine , CapitaLand Ascendas REIT (CLAR), CapitaLand Integrated Commercial Trust (CICT), Singapore Telecommunications (Singtel), Grab and Sea as his top picks.
Among the sectors, the analyst is “overweight” on banks for their stronger fees and high common equity tier-1 (CET-1) levels; REITs for their cheap valuations and higher distributions and small- and mid-caps for the positive oil & gas and restructuring dynamics. He is also “overweight” on Internet stocks for their “stable competition”, strong growth in gross merchandise value (GMV) and rising fintech contributions; telcos on the back of potential market consolidation and capital returns; industrial counters for their high earnings and dividend visibility; and gaming stocks as they could benefit from mass market capacity.
Meanwhile, the analyst is “neutral” on the healthcare, transport and plantations sectors and “underweight” on tech manufacturing due to slow demand.
